Barclays, Nationwide and NatWest have signed up to the government's mortgage indemnity scheme to help first-time buyers get on the housing ladder.

The NewBuy loan guarantee, designed to give would-be buyers access to mortgages even if they only have a 5% deposit, will help 100,000 people who would otherwise have been frozen out of the property market and will support 50,000 construction jobs, the government claims.

Under the scheme, housing developers pay the lender 3.5% of the purchase price of a new-build property while the government provides an additional guarantee of 5.5%, to be called upon only if there is a crash in house prices.

It means Barclays, Nationwide and NatWest can offer large mortgages on new-build homes without taking on all of the risk: they will be guaranteed to not lose money if a property falls into negative equity and is repossessed, with the mortgage indemnity funded by developers and taxpayers.

The scheme is available on flats and houses up to a maximum value of £500,000 in England only, and means a buyer requiring a £40,000 deposit for a £200,000 property will now only need £10,000. The scheme is open to anyone buying a property, but the government sees it as a means for first-time buyers in particular to purchase their first home – a recent survey by Rightmove found that 38% of first-timers believe NewBuy means they will be more likely to buy within a year, and that 24% of first-time sellers will be more likely to buy once the scheme launches.

Halifax will announce details of its own NewBuy products in April 2012, while Santander is thought to be releasing its NewBuy mortgages by the end of June 2012.

Housing minister Grant Shapps said 28,000 homebuyers have already registered their interest in NewBuy with builders since the scheme was first announced in February 2011.

David Cameron added: "We are delivering on our promise to offer affordable mortgages to buyers who might otherwise not be able to raise the money to buy a newly built home. It is no good hoping people will climb the property ladder if the bottom rung is missing. Affordable properties and available mortgages are vital.

"[NewBuy] is a vital boost to the housing market, giving people good, affordable new homes and backing thousands of jobs in construction in the process. This government doesn't just talk about expanding homeownership, we're making it happen."

The NewBuy scheme was greeted warmly by the construction industry, with Stewart Baseley of the Home Builders Federation claiming it will "help thousands of people to meet their aspirations to buy a new home, freeing up the housing market and helping first-time buyers and those unable to take the next step on the ladder."

But critics say it will prove more of a boost to homebuilders than first-time buyers. Katy John of first-time buyer pressure group PricedOut said it will not help potential buyers who fail to satisfy stringent lending criteria, and that sky-high house prices remain a concern.

"It is fair to say Grant Shapps's main objective is to get banks lending to first-time buyers, but if builders can't sell their properties they need to drop the prices to a more affordable level, which would help people get on the ladder," she said.

"We don't need another scheme to help prop up the construction industry, we need progressive taxation such as the mansion tax that has been mooted or a change to the council tax bands – that will be more helpful to first-time buyers in the long run."

Under the NewBuy scheme the lenders will offer 95% loan-to-value (LTV) mortgages on properties built by Barratt, Bellway, Bovis, Linden Homes, Persimmon, Redrow and Taylor Wimpey. NatWest will lend at a fixed rate of 4.29% for two years and at 4.99% for five years; Barclays' rates are 4.99% fixed for two years or 5.89% for four years; and Nationwide is more expensive at 5.69% fixed for three years and 5.99% fixed for five years.

Dvaid Hollingworth of mortgage broker London & Country Mortgages said: "I am impressed with some of the rates, which do seem to back the idea that NewBuy is partly about improving the number and availability of high LTV mortgages on the market. If more lenders sign up it could really gather momentum. But I can't say this will result in the first-time buyer marker igniting; it will probably just tip the balance for someone already considering a new-build property."

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